QuestionAugust 27, 2025

Government intervention is required in the case of a public good because everyone can use the good so no one will pay to produce it. True False

Government intervention is required in the case of a public good because everyone can use the good so no one will pay to produce it. True False
Government intervention is required in the case of a public good because everyone can use the good so no one will pay to produce it. True False

Solution
4.0(195 votes)

Answer

True Explanation 1. Understanding Public Goods Public goods are characterized by non-excludability and non-rivalry, meaning that individuals cannot be excluded from using them, and one person's use does not reduce availability to others. This often leads to the "free rider" problem, where individuals benefit without contributing to the cost of production. 2. Government Intervention Justification Due to the free rider problem, private markets may underproduce public goods since individuals have little incentive to pay for them voluntarily. Government intervention is necessary to ensure these goods are produced and maintained, typically funded through taxation. 3. Evaluating the Statement The statement correctly identifies the need for government intervention in the case of public goods due to the lack of individual willingness to pay for their production, aligning with economic theory on public goods.

Explanation

1. Understanding Public Goods<br /> Public goods are characterized by non-excludability and non-rivalry, meaning that individuals cannot be excluded from using them, and one person's use does not reduce availability to others. This often leads to the "free rider" problem, where individuals benefit without contributing to the cost of production.<br /><br />2. Government Intervention Justification<br /> Due to the free rider problem, private markets may underproduce public goods since individuals have little incentive to pay for them voluntarily. Government intervention is necessary to ensure these goods are produced and maintained, typically funded through taxation.<br /><br />3. Evaluating the Statement<br /> The statement correctly identifies the need for government intervention in the case of public goods due to the lack of individual willingness to pay for their production, aligning with economic theory on public goods.
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